Final answer:
Increasing Herfindahl-Hirschman Index (HHI) values indicate greater market concentration. The HHI is a calculation that factors in the squared market shares of all firms in an industry, with higher values denoting less competition.
Step-by-step explanation:
Increasing Herfindahl-Hirschman Index (HHI) values correspond to higher market concentration. The HHI is a method of measuring market concentration by adding the square of the market share of each firm within the industry. A near-monopolist, as described in an example, causes the HHI to rise significantly.
For instance, consider an industry with one firm holding a 77% market share and 23 other firms with 1% each. The HHI would be calculated as 77² + 23(1²) = 5,952, which is much higher compared to an industry where five firms each hold an equal 20% market share (HHI = 5(20²) = 2,000), despite both industries having a four-firm concentration ratio of 80.